2 Quebec-based Bank Stocks to Pick Up Before the End of 2018

The economy has taken centre stage during the Quebec provincial election. Citizens will head to the polls on October 1, and the ruling party has worked hard to brandish its economic record ahead of the vote. Quebec has reported some of the lowest employment rates since the 1970s, and its growth has managed to keep pace with some of the top provincial performers, including Ontario and British Columbia. Quebec has also benefited from a stable housing market. The Montreal metropolitan area has seen a steady increase, though without the kind of overheating that investors have witnessed in other major…

To keep reading, enter your email address or login below.

Register by giving us your email below to continue reading all of the content on the site. Also receive a free Email Newsletter from the Motley Fool. (You may unsubscribe any time.)

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls.
I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.

The economy has taken centre stage during the Quebec provincial election. Citizens will head to the polls on October 1, and the ruling party has worked hard to brandish its economic record ahead of the vote.

Quebec has reported some of the lowest employment rates since the 1970s, and its growth has managed to keep pace with some of the top provincial performers, including Ontario and British Columbia.

Quebec has also benefited from a stable housing market. The Montreal metropolitan area has seen a steady increase, though without the kind of overheating that investors have witnessed in other major areas like Vancouver and Toronto.

Today we’ll look at two Quebec-based bank stocks that investors should consider adding before the end of the year.

National Bank is a Montreal-based bank and smallest of the Big Six banks in Canada. Shares were up 3.8% in 2018 as of early afternoon trading on September 20, and the stock is up 13% year over year. National Bank released its third-quarter results on August 29.

Net income rose 10% to $569 million in the quarter and diluted earnings per share climbed 11% to $1.52. Its Personal and Commercial Banking segment posted net income of $248 million, which was up 6% from the prior year.

Personal lending posted 3% growth on the back of the mortgage book, and commercial lending was up 8% year over year.

Its other major segments also posted growth in the quarter. Wealth Management, Financial Markets, and U.S. Specialty Finance and International segments posted increases in net income of 22%, 8%, and 6%, respectively.

The board of directors also announced a quarterly dividend of $0.62 per share, representing a 3.7% dividend yield.

Laurentian Bank stock had dropped 21.7% in 2018 as of early afternoon trading on September 20. The stock has suffered a precipitous decline since late 2017, losing nearly $20 in value, as an internal mortgage underwriting crisis has frustrated the share price. Laurentian released its third-quarter results on September 4.

The bank declared that it had completed its mortgage loan portfolio review, and CEO Francois Desjardins said that the situation with CHMC and the third-party purchaser had been resolved. This comes as a relief after the saga had hurt its standing since late 2017.

In the third quarter, adjusted net income fell 1% to $59.4 million and adjusted diluted earnings per share dropped 18% to $1.34. Loans to business customers increased 14% year-over-year, which propelled net interest margin in the quarter to 1.77%. Residential mortgage loans fell $1 billion since October 31, 2017 to $17.5 billion.

The bank has reoriented its lending strategies to focus on higher yield commercial loans to optimize product mix. Laurentian also opted to solely originate residential mortgages through the branch network since November 1, 2017.

The bank also offers a quarterly dividend of $0.64 per share, representing an attractive dividend yield of 5.7%. With its mortgage woes seemingly behind it and commercial lending growth looking solid, Laurentian is a good target for those seeking income in the fall.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.